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State any three advantages of bill of exchange.

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The bills of exchange as instruments of credit are used frequently in business because of the following advantages:

(a) Framework for relationships: A bill of exchange represents an instrument, which provides a framework for enabling the credit transaction between the seller/creditor and buyer/debtor on an agreed basis.

(b) Certainty of terms and conditions: The creditor knows the time when (s)he would receive the money so also debtor is fully aware of the date by which (s)he has to pay the money. This is due to the fact that terms and conditions of the relationships between debtor and creditor such as amount required to be paid; date of payment; interest to be paid, if any, place of payment are clearly mentioned in the bill of exchange.

(c) Convenient means of credit: A bill of exchange enables the buyer to buy the goods on credit and pay after the period of credit. However, the seller of goods even after extension of credit can get payment immediately either by discounting the bill with the bank or by endorsing it in favour of a third party.

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